Interest Rate Roundup

Monday, March 26, 2007

Some long-term perspective on new home supply, sales

This chart shows the supply of new homes for sale going all the way back to 1963 ...

This chart shows the seasonally adjusted annual rate of new home sales going back to 1990 ...

I think it helps to look at the long-term trends when we get disappointing numbers like those out today. The thing that jumps out at me is the magnitude of the supply glut out there in the new home market. We have never had this many homes on the market ... ever. Granted the economy is a different place now than it was in the 1970s. Our population has grown over time. And financing conditions have gotten easier, raising the "natural" level of housing demand. But even after accounting for those factors, we're still sitting on an Everest-sized mountain of homes. The way to work through that supply is via lower home prices.


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